We aren’t referring to imaginary creatures or the newest buzzword on the internet when we mention Kraken, Coinbase, and Gemini. All of them are digital marketplaces where you may purchase and sell cryptocurrencies. After the decentralized cryptocurrency bitcoin launch and the subsequent release of additional cryptocurrencies, many developed numerous virtual platforms to exchange decentralized cryptocurrencies. These platforms are collectively called Cryptocurrency exchange platforms.
What Are Cryptocurrency Exchanges?
A cryptocurrency exchange is a company that enables clients to swap cryptocurrencies or other digital currencies for other assets, including traditional fiat currency or other digital currencies. While some cryptocurrency exchanges specialize in buying and selling digital assets, others offer a wide range of goods and services. These exchanges accept credit card payments, wire transfers, and other modes of payment in exchange for digital currencies or cryptocurrencies.
What Are the Types of Crypto Exchanges?
Platincoin believes that when choosing which exchange to utilize, you should consider your unique financial objectives and risk tolerance. Here are some of the popular types of cryptocurrency exchanges you might come across:
Crypto Brokers
Although they are not pure crypto exchanges, some conventional securities brokers can serve as intermediaries between buyers and sellers of digital assets and the cryptocurrency markets. When executing a huge purchase or sell transaction, an over-the-counter broker (also known as an OTC desk) is often used (think 200 BTC, not 2 BTC).
Traditional Crypto Exchanges
These online marketplaces make buying and selling digital assets easier based on current market rates, and they are known for demanding transaction fees. There are two main categories: Centralized and decentralized exchanges.
Centralized Cryptocurrency Exchanges
A centralized cryptocurrency exchange is managed by a third party or an exchange operator that ensures user registration and trading go without a hitch. When using these services to buy cryptocurrency, it is relatively easy to link your bank account or debit card and perform transactions.
Decentralized Cryptocurrency Exchanges
A decentralized cryptocurrency exchange, or DEX, relies on peer-to-peer (P2P) trading, is open source, and lacks third-party regulation. As explained by Platincoin, DEXs may require more technical expertise and an in-depth understanding of cryptocurrencies than centralized exchanges.
How Do Crypto Exchanges Work?
On most cryptocurrency exchanges, you must first register to purchase and sell, much like with a conventional bank account. You can transfer money (fiat or digital currency) onto the platform and use it to make purchases after completing the Know-Your-Customer (KYC) procedure and being authenticated.
What Should You Consider Before Choosing a Crypto Exchange?
Because cryptocurrencies are unstable and several exchanges have fallen victim to hacking, Platincoin understands how important it is to consider several aspects when choosing an exchange.
Accessibility
Due to local or international legislation, you might not be able to buy or sell cryptocurrency where you are due to specific exchanges. You can easily find details regarding its geographical restrictions and associated accessibility on an exchange’s website or terms and conditions, including the national currencies it accepts.
Fees
Regarding fees, you should only automatically consider an exchange with a pricey exchange fee. Expensive transaction fees equate to better and easier financial services than cheaper ones.
Coins offered
There are thousands of cryptocurrencies, but only some exchanges support them. It would be best if you did a little more research before choosing meme coins or younger altcoins, currencies with a little market cap.
As discussed by Platincoin, other factors include payment methods, regional constraints and rules, reputation, deposit/withdrawal limits, and verification requirements.
